Public Finance and Environment

Letter to EBRD from Korsakov Citizens

To the European Bank for Reconstruction and Development
CC: the Sakhalin Energy Company

18 of June, 2004

The Citizens' Initiative Group of the Russian Federation, consisting of the residents of the Korsakov region of the Sakhalin Oblast', appeals to you in the hope that you will consider our interests and living conditions, our needs, and our outrage in determining conditions for granting credit for the development of the Sakhalin-2 project.

From 2002 to 2004 we have been forced to live in direct proximity to the construction site of the plant -- the largest in the world in natural gas liquefaction (hereafter "LNG plant") - in the village of Prigorodnoye.The construction site is about ten to thirteen kilometers from our population center.The operator of Sakhalin-2 is the Sakhalin Energy Company, and the general contractor for the construction of the LNG plant is the CTSD Company.The LNG plant is being built within the framework of the development of the Sakhalin-2 project.

The scale of the project, the scale of the construction sites, and the scale of the impact on the island of Sakhalin and its residents are enormous.And, unfortunately, they are just as troublesome and dangerous.

From the very beginning the project and its implementation provoked protest and opposition from the residents of the Sakhalin Oblast': we are outraged by the project's creators' disdain for the distinctiveness of Sakhalin's natural environment and their unwillingness to use modern, safe technology in the laying of oil and gas pipelines; our concern is significantly aggravated by the high level of seismic danger in the locations of the laying of pipelines and the LNG plant construction site.

It is unacceptable to us to have this outrageously merciless treatment of Sakhalin's unique and extremely fragile natural environment in practice: and looks especially contradictory and negative beside the Company's frequent, emotionally touching printings of postcards and calendars with the stories of the oil and gas enterprises' love of Sakhalin's animals and plants.

We do not live in the most socially revitalized region of Planet Earth.We have had many problems with the development and the utilization of infrastructure.We had the right to count on the betterment of our living conditions when such a sweeping, expensive project, based on the long-term use of the island's natural resources, was brought to development.

However, with the start of its development (putting aside the distrust, discontent, and concerns of the local population) our life has become worse and more dangerous.

Today we can systemize all our problems which have arisen since the beginning of the plant's construction, and which are deeply felt by us still to the present day.There are many.We get no answers from the Sakhalin Energy Company.The Company's workers only go to hearings organized by the Company: hearings which specialists capable of answering our questions do not attend.The Company shows us videos about someone's wonderful life (in Japan, in Australia, in Latin America), delightedly tells us about their "accomplishments," and does not want to - indeed, refuses to carry on a dialogue with the residents about why we are supposed to live worse off than before in order that someone, somewhere should live better.

At the same time, the Company's representatives do not attend the regional residents' meetings to which they are invited.For example, they were absent in April 2004, at the time of roadside picketing by residents of Ozerskiy, left without food and without a connection with the regional center because the roads to the village were made impassible by the transportation vehicles of the LNG plant.During an assembly of land-owners of the suburban districts, land-owners were suddenly presented with the fait accompli of the demolition of their houses in connection with a change in the project.The situation was repeated at the city's public meeting with representatives of the international ecological organization Friends of the Earth about the problems related to the project's development in the Korsakov region.
And that is only in one and a half months.

We consider that the principles proclaimed by the Sakhalin Energy Company - transparency of action, consideration of the interests of the local population, careful treatment of the natural environment - are not binding.

We simply will not allow the sweep of this unpardonable, flagrant, and destructive invasion into the life of the city and region by the Sakhalin Energy Company, CTSD and their numerous and, moreover, ungovernable subcontractors!

The Company, evidently, is concerned about its own reputation since it initiated the creation of the Partners Coordinating Board for Sustainable Development in the Korsakov Region, and is trying to take part in a few charitable projects.But all that activity becomes worthless when the Company's contractors and subcontractors flagrantly defy international and Russian national norms and regulations.What use are emotionally stirring conversations about trifles, when every day the life of every one of us, and the life of our region, are exposed to danger, and fall under the extreme negative impact of the project.

We have tried in this appeal to summarize all of our issues and concerns, arising from more than two years of work on the project on our land, and worrying us especially in connection with the approach of new stages of the project's development.

At the present time two realistic solutions remain for us:

1.To demand from our own government a full ban on the development of the project through pickets of all transportation arteries leading to the construction site;

2.To demand that additional conditions be added to the project's financing with a guarantee of their fulfillment by the Company without "shifting" to the financial "shoulders" of the Russian side.

The first route doesn't seem constructive to us, but it may become realistic in a desperate situation.

The implementation of the second route depends entirely on you.

So, we will simply enumerate the problems and questions which make our life difficult- at times intolerable- which seriously concern us, and to which the Sakhalin Energy Company (hereafter "the Company") doesn't respond in words or actions.

1.The laying of pipes for the oil and gas pipelines is conducted in a technically dangerous manner for Sakhalin: with the installation of pipes underground and under the river beds of spawning rivers, by a method of horizontal drilling.We are categorically unconvinced by the Company's argument that this is a safe method.

2.In the process of construction a real danger has already arisen concerning the healthy existence of the flora and fauna of the AnivaBay.

3.In the interests of the Company and in connection with the project, the fisheries category of the AnivaBay has been lowered from "Highest" to "First."

4.Already irreparable damage is being inflicted on the bioresources of the Sea of Okhotsk, with the project only beginning its development.

5.The Company is closed to requests for information about its activities.

6.The Company frequently and significantly breaches work jurisdiction deadlines (the routing of roads, the replacement of auto ferries on marine routes of the delivery of cargo, sea-bottom work for the construction of piers, and etc.).

7.The Company didn't ensure the preparation of an infrastructure for its own employees, brought from all ends of Russia and other countries.

8.The Company uses the infrastructure of our city and region without notifying corresponding services and organizations, and without compensation for its invasion and significant increase of burden on the modest maintenance system designed only for the residents of the city and region.

9.All the transport of the Company and its contractors and subcontractors goes through our city.The quantity of heavily burdened transport going through Korsakov is so great that the city roads have been made unusable in a matter of a few months.In response to the demand that they reduce the transportation stream, the Company started to use the night hours for the vigorous movement of its freight. After another demand by the regional administration that they limit traffic, the Company changed its route, and currently Sakhalin Energy's auto-transport now also destroys village roads.

10.During mass passage of heavy-duty equipment through population centers, all residential buildings are exposed to enormous risk (from regular vibration shaking the walls and furniture, and the swaying of the wall and ceiling-related objects), caretakers and teachers in teaching facilities and preschool facilities in the direct vicinity of the roads can't carry on lessons (their voices are simply inaudible), and administrators are required to organize children's road crossings across the street in view of the real danger of death to children under the wheels of the heavy-duty equipment racing along at great speed.

11.On city roads vehicular traffic of the plant frequently causes accidents- convoys of six or more enormous vehicles on two-way city streets bring a real danger to motorists and pedestrians.

12.There are city streets whose sidewalks were eliminated in connection with the Company's vehicular transport through Korsakov.Now those living on those streets risk their lives daily, walking out the doors of their own homes.

13.All work force standards have been violated with the construction of the plant: workers from various countries and regions have been brought to us, and they do not even have decent living conditions, their dormitories are dangerously overpopulated, unsanitary conditions have flourished, incidents of mass poisoning and lice infestation have become fixtures, many of the incoming workers having criminal pasts; and the workers' rights on the construction site are being violated.

14.For our city real threats to health and safety have developed: workers from other cities have effectively brought HIV and syphilis to Korsakov.These facts are especially worrisome in connection with the fact that although the workers live on the territory of the city, they are not registered in the medical facilities of the Korsakov region (despite the requirement on many occasions of such a registration on behalf of the Korsakov medics).Besides this, we are extremely worried by a delicate, natural, but very serious problem: Korsakov has become dangerous for the female residents of the city.In our city there are no specialized facilities for the treatment of physiological problems necessarily occurring among men.The Company's people are forced to work all-out under guard, by preventative method.These people, brought from different places, without family or close ones in the city, and in their psychological state, with sexual activeness, and also (among many of them) those with a criminal past- 1,500 such men- go about provoking the female residents of the city.The city has seen a significant increase in rape attempts.

15.In the AnivaBay the piers for the plant are being built.In connection with this, the sea-bottom is being dredged for the deepening of the bay.The deadline for the completion of this work was clearly defined as the 1st of May.Today it is June, but the dredging of the bay continues.The AnivaBay is the bread-basket for the entire South Sakhalin population.All that is living is being killed on the bay's sea-bottom-twice-during dredging, and in dumping, a few miles off shore: we have what appear to be two dead zones.Besides this, in June salmon will spawn, and they won't enter the muddy waters, which means not only will the region lose its sustenance, but also all our fishing and fish-processing businesses will lose productivity.

16.First Category forests are being logged based on administrative agreements.The agreements were attained by the Company looking to profit from financially weakened and thus dependent organizations.

17.In the region, the practice of invasion of various territories with the documentation formulated after-the-fact ("post factum") is frequent.We find quarries, logged areas, road extensions into the population's traditional recreational areas, etc., in unexpected places.

18.Korsakov residents' loss of their traditional recreation areas is a separate issue.We have lost beaches, the ability to use the Mereiskaya valley for recreation, and access to many recreation areas. People are being driven off suburban weekend home property accumulated over many years, and are not being compensated.The amount of money set aside by the Company as compensation to the city for the loss of its beach was defined by the Company itself, and was not subject to review.However, it is now clear that these resources are insufficient for the development of a single meaningful project towards the creation of a recreational zone for city residents.

19.What is going on in the AnivaBay during the construction of the LNG plant brings outrage and fear for the future to not only us, but also to our neighbors.The administration of the village Ozerskiy got a letter from the administration of its Japanese sister-village Sarafutsu, requesting a meeting.The future of the AnivaBay and Laperuza Sound is also worrying the Japanese side, as their existence is under direct threat due to the development of the "project of the century."

20.We are concerned about the degradation of ecological conditions both in our region and on Sakhalin: we haven't yet experienced it, but we already anticipate the enormous future emissions of carbon dioxide and the future problems with the water treatment of the city.We already see that the Company will have nothing to do with our safety, our health, our lives-means of subsistence, movement.Also awaiting us is the loading of freight tankers in the bay without the existence of approved efforts to ensure the safety of these procedures.

21.We are very scared for the safety of our means of living.This fear is strengthened by accumulated experiences with the activity of the Company- the concealment of all negative information.It means- and we have already seen it in practice!- that the Company is more concerned with their errors being kept secret than the resolution of its errors.

22.It worries us that the Company is willing to go to any lengths to solve problems, including using the imperfections and ambiguity of the Russian legislation, and the well-known isolation of bureaucrats.In our view, the criteria for agreements may- and perhaps should be- at minimum the application of modern, international standards (otherwise why brandish the banner of the project's modernity and its international-level quality?) and the recognition of the interests of the local population (which can't even depend on the availability of natural gas for our small city by such a "great" project).

For now our life has not only not improved, but it has become marked by desperation and exposed to real danger.

Please, provide the answer of the European Bank for Reconstruction and Development on this letter to Elena Viktorovna Rashupkina-Lopukhina, head of Korsakov Citizens Group "Knowledge is Strength"